National Housing Fund: Banks, insurers owe N8.6trn in 5 years

Deposit money banks and insurance companies operating in the country have failed to invest in the National Housing Fund (NHF) as statutorily required under the NHF Act No. 3 of 1992, thus owing the Fund trillions of Naira in un-remitted monies.

Central Bank of Nigeria (CBN) which is supposed to deduct at source from the banks and remit to Federal Mortgage Bank of Nigeria (FMBN), the managers of the Fund, has failed in its responsibility in this regard.

Vanguard investigations showed, for instance, that between 2006 and 2010, banks and insurance firms in the country ought to have invested about N8.58 trillion in the Fund in line with the provisions of the Act. Banks should have invested N8.49 trillion, being 10 percent of their loans and advances for the five year period; while insurance companies should have invested nothing less than N89.49 billion as part of their Non-Life and Life premiums for the period, into the housing fund.

The NHF scheme was established to facilitate the continuous flow of low-cost funds for long-term investment in housing for the benefit of contributors to the fund. The NHF Act states that resources of the fund shall consist of contributions by Nigerians both in the public and private sectors; investment in the fund by commercial and merchant banks; investment in the fund by insurance companies registered under the insurance act and; financial contributions by the Federal Government for long-term loans.

Investigations by Vanguard revealed that neither deposit money banks nor insurance companies have invested a kobo into the housing fund since inception. But most of the banks are rather offering mortgage products of their own with rates clearly outside the 6 per cent stipulated by the NHF Act. When confronted with the provisions of the Act as regards their expected contributions, officials of these financial institutions claimed ignorance of the existence of such a law.

Section 5 of the NHF Act stipulates: “Every commercial or merchant bank shall invest in the fund 10 per cent of its loan and advances at an interest rate of 1 per cent above the interest payable on current account by banks. Every registered insurance company shall invest a minimum of 20 percent of its non life funds and 40 per cent of its life fund in real property development of which not less than 50 per cent shall be paid into the fund through FMBN at an interest rate not exceeding 4 per cent. Nothing contained in the insurance act or relating to investment of insurance companies in real property shall affect the provision of this Act (1991 no 58.).”

OPERATORS
Officials of banks, who spoke to Vanguard differently, on condition of anonymity, said they were not aware of the provisions in the Act that mandated banks to contribute to the NHF. They were however quick to add that their banks have been contributing to housing development through their various mortgage products.

Mr. Gus Wiggle, Managing Director, Linkage Assurance Plc, told Vanguard that though aware of the existence of the NHF Act, he is not aware of any clause in the Act mandating insurance companies to contribute to the Fund. In the same vein, Managing Director, FBN Life Assurance Ltd, Mr. Val Ojumah, said that he is not aware of the clause, adding “I’m not sure that any insurance firm is doing it”.

Even the CBN is culpable in this infraction, because it is the duty of the apex bank, under the Act, to collect contributions from banks and remit same to FMBN.

Section 11 of the Act states: “Central Bank of Nigeria (CBN) shall collect from commercial and merchant banks at the end of every year and not later than month thereafter, the percentage of their contribution to the fund as specified in section 5 (1) of this Act. CBN shall within two month of making collection under subsection (1) of this Act pay the money to the bank for investment in fund.”

However, the CBN has not been complying with this provision. Every attempt to get the reaction of the apex bank to this proved abortive, as correspondences to the Director of Corporate Communications of the bank, Mr. Ugo Okoroafor, were not replied as at the time of filing the story.

FMBN
The Federal Mortgage Bank of Nigeria (FMBN) was empowered by the NHF Act to manage and administer the Fund to ensure that proceeds are utilised to finance the housing sector of the economy through wholesale mortgage lending to primary mortgage institutions (PMIs).

Vanguard also reached out to FMBN to find out if it was aware of these provisions of the Act, and what efforts it has made to ensure compliance by all parties involved. An official of FMBN, who did not want to be named, said the bank is aware of the provisions in the NHF Act that banks and insurance companies are required to invest in the Fund.

“We are aware that the banks are not complying. We have approached the CBN on the matter, it is supposed to be the collecting institution and has not performed. In fact, we have taken the matter to the National Assembly, because the National Housing Fund scheme is an act of parliament which must be respected and obeyed. We have also informed the police for necessary action,” he stated.

Figures of Loans and Advances by Nigerian banks from 2006 to 2010, obtained from CBN, showed that banks gave out N2.5 trillion in 2006; N4.8 trillion in 2007; N7.8 trillion in 2008; N34.4 trillion in 2009 and; N35.4 trillion in 2010. These add up to a total amount of N84.9 trillion for the five year period.

Given that banks are supposed to invest 10 per cent of their Loans and Advances into the National Housing Fund, about N8.494 trillion should have been invested in the Fund by the banks over the period.

On the insurance side, data from National Insurance Commission (NAICOM) shows that total Non-Life premiums of insurance firms in the country for the period 2006 to 2010 is about N599.79 billion. The breakdown is N81.6 billion in 2006; N89.1 billion in 2007; N126.4 billion in 2008; N153.5 billion in 2009 and; N149.2 billion in 2010.

For Life premiums over the same period, insurance companies collected a total amount of about N147.55 billion – N13.4 billion in 2006; N15.6 billion in 2007; N29. 5 billion in 2008; N36.8 billion in 2009 and; N52.2 billion in 2010.

According to the NHF Act, a minimum of 20 per cent of non life funds (N119.96 billion) and 40 percent of its life fund (N59.02 billion) should be invested in real property development.

This amounts to N178.98 billion for the five year period. The Act further stipulates that not less than 50 per cent of investment in property development should be paid into the NHF through the Federal Mortgage Bank of Nigeria (FMBN). This means that between 2006 and 2010, the insurance companies in Nigeria ought to have paid at least N89.49 billion (50 percent of N178.98) into the coffers of FMBN for the housing fund.

It therefore followed that banks and insurance firms should have contributed N8.494 trillion and N89.49 billion, respectively, into the coffers of NHF between 2006 and 2010, cumulatively adding up to about N8.58 trillion.

DEVELOPERS
Vanguard also got other stakeholders to bare their minds on this development which has far reaching implication on housing finance in Nigeria. Chief Olabode Afolayan, President of Real Estate Developers Association of Nigeria (REDAN), the umbrella body of property developers in the country, said the general attitude of banks to housing finance in the country is lamentable, declaring that their non-compliance with the provisions of the NHF Act in particular will be taken up by his association.

“It is a serious matter, which bothers on violation of the constitution. What we intend to do is to set up a committee of experts to critically look into this and advise us appropriately. We will take steps to sensitize the National Assembly on the development, and also write to the CBN because this shows clearly that the apex bank has not been playing its expected role as a regulator of the banks. After thoroughly examining the issue, we may even go to court to ensure that they take up their responsibilities under the NHF Act,” he stated.

Afolayan added that a lot of advocacy is also required on the part of the mass media to bring out some of these facts into the public domain in order to ensure that everybody plays its role in financing housing development in the country.

In his own reaction, Managing Director/CEO, Lagoon Home Savings & Loans Ltd, Mr. Kehinde Taiwo, said: “I’m not very sure of this provision. I’m only aware of similar regulation under the SMEs where banks are specifically required to yield up 10 percent of their PAT to the CBN. Most banks chose to set up institutional vehicles to run this scheme. But the question is how successful has it been up to date.

“Since banking deregulation, in terms of sectoral allocation of credit portfolios, it has been clearly established that given all the liberties of deregulation, banks are not inclined towards any long term lending. Housing loans share this attribute. Unfortunately, there is no strict enforcement of these rules. Where CBN make attempts at some enforcement, you discover most banks would gladly oblige the penalties as these are cheaper than the financial cost of complying. The regulations may be there but implementation and effectiveness is another thing. That’s the bane of Nigerian banking system for now.”

NHF COLLECTIONS
Data available from FMBN shows that NHF collection as at February 2012 is N81.597 billion from 3,657,354 registered contributors, from inception of the fund. Out of this, the bank had disbursed N34.036 billion as NHF loans through the PMIs, while N49.182 billion was disbursed as Estate Development Loans (EDL), bringing the total NHF loans that have been disbursed to N83.218 billion.

FMBN also noted that as at February 2012, houses built with Primary Mortgage Institution (PMI) loans are 18,668 units while those built with Estate Development Loans (EDL) are 32,950 units. This shows that the NHF scheme has been able to deliver just 51,618 housing units across the country since inception in 1992, representing an average development of about 2,581 units per annum over the last 20 years. According to FMBN’s Managing Director, Mr. Gimba Ya’u Kumo, this is too insufficient.